How do RSE and AFS licensing application processes work together

This is Information Sheet 86 (INFO 86). It explains how the Australian Prudential Regulation Authority’s (APRA) registrable superannuation entity (RSE) licensing process and ASIC’s AFS licensing process work together.

This information sheet provides guidance for superannuation trustees who need an Australian financial services (AFS) licence to:

• provide a superannuation trustee service and deal in financial products in their capacity as a trustee (including interests in superannuation funds)
• provide financial product advice (usually in relation to interests in their own funds).

• Why do trustees need both an RSE licence and an AFS licence?
• How do the APRA and ASIC licensing processes differ?
• How does the legislation minimise potential overlap?
• How do the APRA and ASIC requirements interact?
• Should trustees lodge applications at the same time?
• Where can I find out more about the RSE licensing process?
• Where can I find out more about the AFS licensing process?

Why do trustees need both an RSE licence and an AFS licence?

An RSE licence is not the same as an AFS licence. An RSE licence allows an APRA-regulated trustee to operate a superannuation fund. An AFS licence allows a trustee to carry on the business of providing financial services by:

• providing a superannuation trustee service
• dealing in financial products (including interests in superannuation funds)
• providing financial product advice

Accordingly, APRA and ASIC each have a different focus when considering whether an RSE licence or an AFS licence should be granted.

How do the APRA and ASIC licensing processes differ?

APRA’s licensing requirements are prudentially focused. The APRA licensing process focuses on the operations, systems and resources (including risk management systems and financial resources) that trustees have in place to ensure that, under all reasonable circumstances, the financial promises made to their beneficiaries (superannuation fund members) are kept. This means that APRA needs information to assess the honesty and integrity of an applicant for an RSE licence, and that demonstrates its likely compliance with the legislative and prudential standard requirements.

ASIC’s licensing requirements mainly focus on consumer protection and market integrity. ASIC assesses whether an applicant for an AFS licence will provide financial services in an efficient, honest and fair manner. This includes an assessment of the applicant’s competence to provide financial services (such as providing a superannuation trustee service, dealing in financial products and providing advice about interests in a superannuation fund). In order to conduct this assessment, ASIC usually needs the applicant to provide information about the qualifications of its ‘responsible managers’ and whether they are fit and proper to undertake their role. ASIC may also ask the applicant to provide information relevant to the assessment of matters such as its compliance measures and its processes for handling complaints from retail clients.

The RSE and AFS licensing requirements may potentially overlap; however, any overlap has been minimised, both by legislation and by the practices of the regulators. In general, ASIC requires less information from entities that are also regulated by APRA than it does from other entities.

How does the legislation minimise potential overlap?

An assessment of the financial, technological and human resources and risk management systems of a trustee is important for both APRA and ASIC. The Corporations Act 2001 (Corporations Act) has the effect that if an AFS licensee is regulated by APRA, ASIC is only required to separately assess or monitor the licensee’s level of resources or risk management systems when the licensee

• holds an RSE licence
• is also authorised to operate registered managed investment schemes.

This means that ASIC will not require a superannuation trustee who is an RSE licensee, or is applying for an RSE licence, to provide information about its financial, technological or human resources, or its risk management systems. ASIC will only require this information if the trustee also operates registered managed investment schemes.

How do the APRA and ASIC requirements interact?

ASIC must apply the fit and proper person test for AFS licence applicants, including those that are regulated by APRA.

For more information, see Information Sheet 240 AFS licensing – Requirement for certain applicants to provide further information (INFO 240).

Where an RSE licensee applies for an AFS licence, ASIC will accept that a responsible manager who meets APRA’s standards and guidance has adequate qualifications and training for those financial services that APRA also regulates (e.g. to issue interests in a superannuation fund) under option 1 in ASIC’s Regulatory Guide 105 AFS licensing: Organisational competence (RG 105). For APRA’s standards and guidance, see Prudential Standard SPS 520 Fit and proper and Prudential Practice Guide SPG 520 Fit and proper. The applicant will still have to show that the relevant responsible manager has three years relevant experience over the past five years in order to satisfy option 1 in RG 105.

ASIC also requires an applicant to provide detailed information about the relevant qualifications, training and experience of the responsible managers who provide additional financial services, such as providing personal financial product advice.

Applicants should note that the criminal history checks suitable for APRA assessment contain more information than the criminal history checks for ASIC. This is due to the operation of the law in relation to spent convictions. This means that if the applicant for an RSE licence already has an AFS licence, APRA will insist on a new, more comprehensive, criminal history check for the responsible persons in its assessment for the RSE licence.

Should trustees lodge applications at the same time?

Where a trustee does not hold an RSE or AFS licence, it should apply to APRA for an RSE licence and to ASIC for an AFS licence at the same time. It should indicate that it has also applied for an AFS or RSE licence in each application.

When ASIC is satisfied that the superannuation trustee should be granted an AFS licence, ASIC will issue a draft AFS licence subject to the applicant receiving an RSE licence from APRA. ASIC will then grant the AFS licence when the applicant is granted the RSE licence by APRA.

Where can I find out more about the RSE licensing process?

See the Licensing guidelines for superannuation webpage on the APRA website.

Where can I find out more about the AFS licensing process?

See the AFS Licensing Kit (RG 1–3).

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.